In a setback to Indian Air Force's (IAF) plans to expand its capabilities, the Defence Ministry has cancelled a tender worth around Rs 6,000 crore for procuring six air-to-air refuelling aircraft.

The contract was cancelled after the Finance Ministry had raised objections over the price of the aircraft recommended and chosen by the IAF after an over two-year-long process, Defence Ministry sources said.

The IAF had recommended the government to buy the Airbus A330 multirole transport tanker aircraft as it believed that the European aircraft was technologically more capable than the Russian IL-78 aircraft in the fray, they added.

The price quoted by Airbus for its aircraft was more than what the Russians were asking and as per the Defence Procurement procedure (DPP) norms, the government must buy the cheapest item that satisfies the qualitative requirements of the forces.

Airbus and Ilyushin were the only two contenders in the race. The IAF already has a fleet of six mid-air refuellers, which are based in Agra and are used for increasing the endurance of its fighter aircraft.

Four years ago, the Defence Ministry had sent request for proposal to American Lockheed Martin, Boeing, European EADS and Russian Ilyushin. Lockheed Martin and Boeing did not respond to the tender.